Investors can gain exposure to international markets that show potential growth with the purchase of a foreign ETF that follows the index for a particular country. In some cases, international exposure can be achieved by including foreign currency ETFs in a portfolio. Here's some more information on foreign ETFs to help with your investing strategy.
For certain industries that show potential growth or even a decline, an investor can purchase industry ETFs that follow the indexes for those particular market sectors. This allows an investor to gain exposure to an industry as a whole without having to corner the market on all the related stocks of a sector, or at least on the major players.
04Cash Flow Utilization
Extra money can be put to use by purchasing short-term ETFs during periods of excess cash flow so there's always an opportunity for earning a potential return. During periods of cash flow deficit, ETFs can be easily liquefied with one single trade.
05Price Differences (Arbitrage)
There can be price differences among an index and its derivative contracts, such as futures and options, due to volatile market conditions like currency and interest rates. The buy or sell of an ETF can take advantage of the arbitrage opportunity when it's calculated correctly, but it's a difficult strategy to utilize.
The accountability of a portfolio will change hands when fund and portfolio managers change positions or leave financial firms. The purchase or sale of a short-term ETF can help bridge that transition period in order to compensate for any risk exposure.
An investor can utilize various ETF trading strategies to better manage their portfolio in general or to take advantage of information from market forecasts after conducting a thorough analysis.
If an analyst has confidence in the overall market but is bearish on a particular sector, one or a combination of specifically targeted ETFs can allow investors to take advantage of this information.
In a long-term investing strategy scenario, an investor can buy a specific ETF to fill a gap in an otherwise well-diversified portfolio. In short-term investing situations, targeted ETFs can be used to hedge positions and may involve leverage or reverse-leverage scenarios.
For example, an investor can purchase an ETF that tracks the broad market while short-selling an ETF in the particular sector that analysts have forecasted to underperform. Targeted ETFs allow investors to get exposure to particular areas of conviction while still being able to control risk by hedging with inversely-correlated ETFs
7 ETF Investing Strategies
Learn How to Invest in ETFs to Your Best Advantage
Including Exchange Traded Funds (ETFs) in your investing strategy might be the way to go if you're looking to diversify your portfolio, increase market exposure or invest extra cash.
Following are several ways you can incorporate ETFs into your investing strategy, along with some of their advantages and details to consider.